MISSISSAUGA, ON, April 27, 2021 /CNW/ – Morguard North American Residential REIT (the “REIT”) (TSX: MRG.UN) today announced its financial results for the three months ended March 31, 2021, including a brief operational and liquidity update as we continue to focus on our essential service of providing safe homes to our tenants during this COVID-19 pandemic.
First Quarter Highlights
The REIT is reporting first quarter performance of:
- Net operating income (“NOI”) of $15.2 million for the three months ended March 31, 2021, a decrease of $2.1 million, or 12.2% compared to 2020, and Proportionate NOI (excluding the impact of realty taxes accounted for under IFRIC 21) of $31.8 million for the three months ended March 31, 2021, a decrease of $3.5 million, or 10.0% compared to 2020.
- Same Property Proportionate NOI in Canada decreased by $1.1 million (or 7.6%), and in the U.S. decreased by US$0.8 million (or 5.2%), compared to 2020.
- Basic funds from operations (“FFO”) of $15.6 million for the three months ended March 31, 2021, a decrease of $2.5 million, or 13.7% over the same period in 2020.
- Basic FFO of $0.28 per Unit for the three months ended March 31, 2021, a 12.5% decrease as compared to the $0.32 in 2020. The change in foreign exchange rate had a $0.02 per Unit negative impact.
- FFO payout ratio for the three months ended March 31, 2021 of 63.0% compared to 54.3% in 2020.
- Net income of $27.4 million for the three months ended March 31, 2021, a decrease of $69.8 million over the same period in 2020. The decrease in net income is predominantly due to a lower non-cash fair value gain on Class B LP Units, partially offset by a higher fair value gain on income producing properties.
The REIT is reporting the following corporate and portfolio highlights:
- As at April 27, 2021, the REIT collected 98.4% of first quarter rental revenue and approximately 95.4% (95.2% in Canada / 95.5% in the U.S.) of April 2021 rental revenue which is materially in line with historical collection rates.
- As at March 31, 2021, average monthly rent (“AMR”) in Canada increased by 4.3% compared to March 31, 2020, while occupancy decreased to 93.6% at March 31, 2021, compared to 98.8% at March 31, 2020. Occupancy in Canada declined due to reduced leasing traffic, lower immigration levels as well as two properties impacted by university closures.
- As at March 31, 2021, AMR in U.S. on a Same Property basis, increased by 0.7% compared to March 31, 2020, while occupancy was stable at 95.1% at March 31, 2021, compared to 95.4% at March 31, 2020.
- As at March 31, 2021, indebtedness to gross book value ratio of 42.1%, lower compared to 42.8% as at December 31, 2020.
Financial and Operational Highlights
|
As at |
March 31, |
December 31, |
March 31, |
|
(In thousands of dollars, except as noted otherwise) |
2021 |
2020 |
2020 |
|
Operational Information |
|||
|
Number of properties |
43 |
43 |
43 |
|
Total suites |
13,275 |
13,275 |
13,277 |
|
Occupancy percentage â Canada |
93.6% |
94.9% |
98.8% |
|
Occupancy percentage â U.S. |
93.7% |
92.2% |
95.4% |
|
Average monthly rent – Canada (in actual dollars) |
$1,509 |
$1,500 |
$1,447 |
|
Average monthly rent – U.S. (in actual U.S. dollars) |
US$1,429 |
US$1,428 |
US$1,419 |
|
Summary of Financial Information |
|||
|
Gross book value |
$3,090,429 |
$3,084,358 |
$3,197,607 |
|
Indebtedness |
$1,302,145 |
$1,320,708 |
$1,406,102 |
|
Indebtedness to gross book value ratio |
42.1% |
42.8% |
44.0% |
|
Weighted average mortgage interest rate
|
3.45% |
3.45% |
3.49% |
|
Weighted average term to maturity on mortgages payable (years) |
4.6 |
4.8 |
5.4 |
|
Exchange rates – United States dollar to Canadian dollar |
$1.26 |
$1.27 |
$1.42 |
|
Exchange rates – Canadian dollar to United States dollar |
$0.80 |
$0.79 |
$0.70 |
|
For the three months ended March 31 |
||
|
(In thousands of dollars, except per Unit amounts) |
2021 |
2020 |
|
Summary of Financial Information |
||
|
Interest coverage ratio |
2.32 |
2.36 |
|
Indebtedness coverage ratio |
1.54 |
1.61 |
|
Revenue from real estate properties |
$60,322 |
$62,297 |
|
NOI |
$15,184 |
$17,290 |
|
Proportionate NOI |
$31,818 |
$35,362 |
|
Same Property Proportionate NOI |
$32,009 |
$35,362 |
|
NOI margin – IFRS |
25.2% |
27.8% |
|
NOI margin – Proportionate |
52.2% |
55.3% |
|
Net income |
$27,395 |
$97,160 |
|
FFO – basic |
$15,619 |
$18,107 |
|
FFO – diluted |
$16,562 |
$19,061 |
|
FFO per Unit – basic |
$0.28 |
$0.32 |
|
FFO per Unit – diluted |
$0.27 |
$0.32 |
|
Distributions per Unit |
$0.1749 |
$0.1749 |
|
FFO payout ratio |
63.0% |
54.3% |
|
Weighted average number of Units outstanding (in thousands): |
||
|
Basic |
56,248 |
56,207 |
|
Diluted |
60,481 |
60,440 |
|
Average exchange rates – United States dollar to Canadian dollar |
$1.27 |
$1.34 |
|
Average exchange rates – Canadian dollar to United States dollar |
$0.79 |
$0.74 |
Operational and Liquidity Update
With the guidance of public health authorities, and at the direction of various levels of government, Morguard continues to implement measures to help reduce the spread of COVID-19. We are actively monitoring the ongoing developments with regards to COVID-19 and are committed to ensuring a healthy and safe environment, adjusting our service model as necessary.
In September 2020, the Government of Ontario introduced Helping Tenants and Small Businesses Act legislation to freeze rent in 2021. The 2021 Ontario rent freeze will impact rental increases as the annual guideline rental increase has been set at 0.0% in 2021 (2.2% for 2020). However, the REIT can apply for an above-guideline increase (“AGI”) relating to eligible capital repairs and security services. Currently, the REIT has AGIs at seven Ontario properties providing additional rent increases for a twelve-month period commencing at various effective dates in 2020, ranging from 0.50% to 2.00% and five additional AGI applications have been submitted during 2021 with effective start dates between April to June 2021. Although the rental market has softened, the REIT still has the ability to increase rents on turnover and through above guideline applications.
On December 26, 2020, the Ontario government announced another province-wide shutdown and stay-at-home order and on February 8, 2021, the Ontario government announced the transition to a regional approach to staged reopening. On April 7, 2021, the Ontario government announced sweeping changes to its COVID-19 lockdown framework and approved another province-wide shutdown and 28-day stay-at-home order, which has subsequently been extended by two weeks, requiring everyone to remain at home except for essential purposes. During this state of emergency, the Ontario government has issued an emergency order temporarily halting the enforcement of residential evictions. While the Landlord and Tenant Board (“LTB”) will continue to hear eviction applications and issue eviction orders, these orders will not be carried out while the province is under a state of emergency.
In the U.S. regions where the REIT operates, the Department of Health and Human Services and the Centers for Disease Control and Prevention issued an order titled Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19 for eligible tenants until December 31, 2020 which has subsequently been extended to June 30, 2021.
The following information as of April 27, 2021, provides an operating update on the REIT’s portfolio and liquidity position:
- As at April 27, 2021, the REIT’s collection of rental revenue since January 1, 2020 is summarized by region as follows:
|
Region |
Q1 2021 |
April 2021 |
% Rental Revenue |
||
|
Canada |
99.1% |
95.2% |
38.7% |
||
|
U.S. |
97.9% |
95.5% |
61.3% |
||
|
Total |
98.4% |
95.4% |
100.0% |
||
|
Region |
Q1 2020 |
Q2 2020 |
Q3 2020 |
Q4 2020 |
% Rental |
|
Canada |
99.8% |
99.8% |
99.5% |
99.5% |
38.1% |
|
U.S. |
100.0% |
99.7% |
99.5% |
99.3% |
61.9% |
|
Total |
99.9% |
99.7% |
99.5% |
99.4% |
100.0% |
- The details of bad debt expense (recovery) recorded in the consolidated statements of income within property operating costs for the three months ended March 31, 2021 and 2020 are provided below:
|
For the three months ended March 31 (in thousands of dollars) |
2021 |
% |
2020 |
% |
|
|
Canada |
($2) |
0.0% |
$10 |
0.0% |
|
|
U.S. |
526 |
1.4% |
367 |
1.0% |
|
|
Total |
$524 |
0.9% |
$377 |
0.6% |
- The REIT implemented a rent deferral program for our residential tenants who are financially constrained due to the impact of COVID-19. The REIT is actively working with residents on a case-by-case basis on rent deferral arrangements and will also ensure pertinent and timely information regarding Government financial support programs is shared with tenants. As at April 27, 2021, approximately 1.0% of residential tenants have deferred payment plans.
- As at April 27, 2021, the REIT’s occupancy in Canada and in the U.S. with the exception of a few properties directly impacted by university and local business closures remains stable as leasing agents work remotely and utilize online technology to continue leasing activity following the onset of social distancing guidelines. Generally speaking, current conditions including social distancing have reduced leasing traffic. In addition, management will closely monitor any impact Ontario’s current state of emergency as well as the extension of the U.S. eviction moratorium may have on traffic and turnover levels in the coming months.
- The REIT has liquidity of $115.9 million, comprised of approximately $19.8 million in cash and $96.1 million available under its revolving credit facility with Morguard Corporation and has approximately $45.0 million of unencumbered assets. In addition, the REIT has commenced the process to refinance four CMHC-insured residential properties schedule to mature in the third quarter of 2021. The REIT has also narrowed down the scope of its capital expenditure program to ensure the availability of resources, allocating an amount that enables the REIT to maintain the structural and overall safety of the properties.
Net Income
The REIT reported a net income of $27.4 million for the three months ended March 31, 2021, a decrease of $69.8 million compared to $97.2 million in 2020. The decrease in net income was primarily due to the following:
- A decrease in net operating income of $2.1 million;
- An increase in interest expense of $2.0 million;
- A decrease in trust expenses of $0.5 million;
- A decrease in equity loss from investment of $0.8 million;
- A decrease in foreign exchange gain of $1.8 million;
- A decrease in other income of $0.2 million;
- An increase in net fair value gain on real estate properties of $17.0 million;
- A decrease in fair value gain on Class B LP Units of $81.3 million; and
- An increase in income taxes (current and deferred) of $0.7 million.
Net Operating Income
For the three months ended March 31, 2021, NOI from the REIT’s properties decreased by $2.1 million (or 12.2%) to $15.2 million, compared to $17.3 million in 2020. The decrease in NOI is due to a decrease in Same Property NOI of $1.8 million (or 10.4%) and a decrease in NOI from the REIT’s redevelopment property in Louisiana currently under initial lease-up of $0.3 million. The Same Property decrease of $1.8 million is due to a decrease in Canada of $1.1 million (or 7.6%), a decrease in the U.S. of US$0.4 million (or 17.0%) and the change in foreign exchange rate which decreased NOI by $0.3 million.
For the three months ended March 31, 2021, Proportionate NOI from the REIT’s properties decreased by $3.5 million (or 10.0%) to $31.8 million, compared to $35.3 million in 2020. The decrease in Proportionate NOI is due to a decrease in Same Property Proportionate NOI of $3.4 million (or 9.5%) and a decrease in NOI from the REIT’s redevelopment property in Louisiana currently under initial lease-up of $0.2 million. The Same Property decrease of $3.4 million is due to a decrease in Canada of $1.1 million (or 7.6%), a decrease in the U.S. of US$0.8 million (or 5.2%) and the change in foreign exchange rate which decreased Proportionate NOI by $1.5 million.
Funds From Operations
Basic FFO for the three months ended March 31, 2021, decreased by $2.5 million, or 13.7%, to $15.6 million ($0.28 per Unit), compared to $18.1 million ($0.32 per Unit) in 2020. The decrease is mainly due to lower Proportionate NOI of $3.5 million, partially offset by a decrease in interest expense (excluding distributions on Class B LP Units and fair value adjustments on the conversion option on the convertible debentures) and a decrease in trust expenses. Basic FFO for the three months ended March 31, 2020, includes $0.5 million from a successful property tax appeal, net of consulting fees.
Basic FFO per Unit for the three months ended March 31, 2021, decreased by $0.04 to $0.28 per Unit, compared to $0.32 per Unit in 2020. The change in foreign exchange rate had a $0.02 per Unit negative impact.
The REIT’s unaudited condensed consolidated financial statements for the three months ended March 31, 2021, along with the Management’s Discussion and Analysis will be available on the REIT’s website at www.morguard.com and will be filed with SEDAR at www.sedar.com.
Non-IFRS Measures
The REIT’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures, NOI, Proportionate NOI, Same Property NOI, Same Property Proportionate NOI, FFO, indebtedness, gross book value, indebtedness to gross book value ratio, interest coverage ratio, indebtedness coverage ratio and Proportionate Basis (collectively, the “non-IFRS measures”) as well as other measures discussed elsewhere in this press release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. The REIT uses these measures to better assess the REIT’s underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the REIT’s Management’s Discussion and Analysis for the three months ended March 31, 2021 and available on the REIT’s profile on SEDAR at www.sedar.com.
Conference Call Details
Morguard North American Residential Real Estate Investment Trust will hold a conference call on Thursday, April 29, 2021 at 3:00 p.m. (ET) to discuss the financial results for the three months ended March 31, 2021 and 2020. To participate in the conference call, please dial 416-764-8688 or 1-888-390-0546. Please quote conference ID 63852580.
About Morguard North American Residential REIT
The REIT is an unincorporated, open-ended real estate investment trust established under and governed by the laws of the Province of Ontario. The Units of the REIT trade on the Toronto Stock Exchange under the ticker symbol MRG.UN. With a strategic focus on the acquisition of high-quality multi-suite residential properties in Canada and the United States, the REIT maximizes long-term Unit value through active asset and property management. Its portfolio consists of 13,275 residential suites (as of April 27, 2021) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North Carolina, Virginia and Maryland with an appraised value of approximately $3.0 billion at March 31, 2021. For more information, visit the REIT’s website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate Investment Trust
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